October 4, 2006

 

Brazil's soy market quiet, exporters waiting for 2007

 

 

Brazil's soy exporters are waiting for 2007 at this point because most of the soy from the 2005/06 crop already has been exported or registered for shipments between October and February.

 

Brazil has some 26 million tonnes of soybeans registered for export, according to industry estimates from the Brazilian Vegetable Oils Industry Association, but traders estimate that actual market-year export volume will fall somewhere between 24 and 25 million tonnes.

 

Some traders have seen no increase at all in soy export volume this year, and one major US multinational said it actually exported less soybeans this year than in 2005. That could continue in 2007.

 

As planting season approaches, farmers are still intent on investing much less in fertiliser and agro-chemicals. As a result, sales of transgenic soybeans have risen, according to estimates made Tuesday by Brazil's crop science institute, Embrapa. Transgenic soybeans help farmers control the spread of weeds and so reduce the need to spray herbicides.

 

"If we have problems with this new crop, we are going to export less soybeans next year and that means less income, once again, for the entire supply chain," said a trader at export firm Coimex.

 

Business for new soy remains slow, according to brokers. "Credit is very tight and large trading houses are being less liberal with loans this year. Everyone is being risk averse," said Helio Sirimarco, a consultant for brokerage firm Ativa Corretora in Rio De Janeiro.

 

Physical sales remain most active in Rio Grande do Sul, the no. 3 soy-producing state, with 3,000 tonnes sold on Monday and 10,000 tonnes sold late last week, according to Ativa's numbers.

 

Mato Grosso do Sul had some volume on Monday, selling 2,000 tonnes of soybeans.

 

Prices at the Paranagua port in Parana state rose over the last two days to 30.20 Brazilian reals (US$13.98) a 60-kilogramme bag, according to Alianca Corretora, a brokerage firm.

 

Soy premiums have come down slightly for October and November deliveries, falling to 72 cents below the November soybean contract on the Chicago Board of Trade on Monday. May 2007 premiums have not changed all week, holding at 30 cents over the May CBOT soybean contract.

 

International soy prices have been falling far below the US$6 a bushel level Brazil farmers need--given the current foreign exchange rate--to cover production costs, especially in the centre-west soy belt. The dollar is currently worth BRL2.16, an uncomfortable level for soy farmers. November soybeans closed at US$5.45 a bushel on Monday and opened below that on Tuesday morning. So all signs point to another slow day for Brazilian soybeans.

 

Agroconsult estimates Brazil will reduce planted area by roughly 6 percent nationwide, or roughly 20 million hectares of total planted area.

 

Reductions in Brazil's crop, however, will be made up by increased output in Argentina and another bumper crop in the US, so world soybean stocks won't be greatly affected by Brazil's shrinking soy fields.

 

Brazil is the world's no. 2 soy producer and exporter.